Draft law imposing capital gains tax on all stock transactions, including warrants, impacts on benchmark

The controversial bill imposing a capital gains tax from January 1 on stock transactions in addition to the existing a flat 0.20 percent charge on stock sales has prompted a strong reaction from the Capital Market Commission, Athens Exchanges SA and the associations of stockbrokers and investors, while sending the benchmark index of the local bourse down more than 2.5 percent on Friday.

The ATHEX general index closed at 1,156.74 points, sliding 2.54 percent from Thursday’s 1,186.93 points, which meant losses of 1.75 percent on a weekly basis. The large-cap FTSE/ATHEX 25 contracted 2.58 percent to end at 378.14 points.

The Finance Ministry’s bill includes a provision for a 15 percent capital gains tax on all transactions including warrants (the rights for the acquisition of bank shares when they return to the private sector) that were given to shareholders for free during the recapitalization process this summer. The ministry has also rejected the proposal put forward by the regulators, investors and stockbrokers for a 25,000-euro tax free threshold.

“Greece has become the only country among the eurozone’s 17 member states to draw up legislation against the stock market and local investors,” a market source commented to Kathimerini.

Along with the capital gains tax, the 0.2 percent charge on stock sales will also apply, even though it had been increased to that level on the understanding that a capital gains tax would not be introduced.

It is therefore no surprise that the bourse reacted as it did on Friday while market observers warn that unless certain significant corrections are made to the draft law, investors will depart the market in droves at a time when it had been viewed as one of the few efficient sources of funding for the cash-starved economy.

In Friday bourse’s session, the only blue chips that did not head south were National Bank (up 0.71 percent) and Terna Energy (0.55 percent). The losers were headed by Marfin Investment Group (down 5.31 percent), Folli Follie (4.91 percent) and Coca-Cola HBC (4.10 percent).

In total 40 stocks posted gains, 101 recorded losses and 19 remained unchanged. Turnover amounted to 94.7 million euros, up from Thursday’s 70 million.